California Probate, Will & Trust Lawyer > Blog > Probate > Can Lottery Winnings Be Inherited?
For many people, winning the lottery is a life-changing event. Winning the lottery can offer financial stability, allowing winners to pay off debt, invest, and even buy a home. Winning the lottery can give someone the opportunity to achieve their life goals. But what happens when a lottery winner dies? Can these winnings be inherited? Lottery winnings can be inherited in most cases. However, different factors might impact how these winnings can be inherited. Read on for more information on this topic.
Lottery Lump-Sum Payment and Annuity
After someone wins the lottery, they can choose the annuity or lump-sum payment option. The lump-sum payment option allows the winner to get all their money at once. This can be a good option for individuals with huge debts or who wish to invest their money over a long period. On the other hand, the annuity option entails a lottery winner receiving a series of payments over a predetermined period of time. Usually, payments are made yearly. This option can provide winners with a steady income stream. Going with the annuity option can also potentially reduce the tax burden.
Whether someone chooses the annuity or cash option, lottery winnings can typically be inherited by a deceased person’s beneficiaries or heirs. However, the annuity option can make inheritance issues a bit more complicated. However, often, lottery winners who choose the annuity option will be able to pass on their winnings to their loved ones. That said, it is crucial that you check with state laws to determine which laws apply to lottery annuity payments.
Can a Mega Millions Annuity Be Inherited?
When a person wins a Mega Millions jackpot, they can receive their prize as a lump sum or an annuity. When a winner chooses the annuity option, their prize money is paid out over a period of 30 years. A Mega Millions annuity can be inherited. After a jackpot winner dies, the annual scheduled payments will go to the designated beneficiary or the decedent’s estate.
Are Inherited Lottery Winnings Taxable?
Generally, inherited lottery winnings are not taxable in California since there is no federal or state inheritance tax in California. However, it is vital to note that there is a difference between inheritance tax and estate tax. An estate belonging to a lottery winner might be subject to estate tax. While California does not have a state-level estate tax, the federal estate tax could apply to a California lottery winner’s estate.
Under federal law, there is an estate tax exemption. This is the amount of a person’s estate that is not taxable after their death. If a decedent’s estate is valued below the federal tax exemption threshold, the estate does not owe any federal tax. On the other hand, if the estate is valued at more than the federal tax exemption threshold, then the estate owes federal tax. For example, in 2024, if a decedent’s estate is valued at more than $13.61 million, it is subject to federal estate tax. Depending on how much is above the exemption threshold, estate tax can be anywhere between 18 to 40 percent.
Contact The Probate Guy
For more information, contact the skilled and dedicated California probate lawyer, Robert L. Cohen – The Probate Guy – today to schedule a telephonic consultation.
Southern California Probate Lawyer Serving Orange, Riverside, Anaheim, Whittier & Beyond.
Source:
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By The Probate Guy | Posted on February 8, 2024
